Juridica Investments Share News (JIL)

By Ian Ransom MELBOURNE, Dec 24 (Reuters) - Litigation funder IMFAustralia said it will back lawsuits in Europe relatedto billions of dollars worth of toxic derivatives created by ABNAMRO Bank N.V. and rated triple-A by Standard and Poor's afterwinning a similar case in Australia. IMF Australia said in a statement it had set up a foundationbased in The Hague to pursue claims from investors who boughtCPDOs, or constant proportion debt obligations - creditderivatives created by the Dutch bank and stamped with S&P'shighest rating. ABN AMRO Bank N.V. is now owned by Royal Bank ofScotland. IMF Australia managing director Hugh McLernon told FairfaxMedia the foundation was the equivalent of a class action in theNetherlands. "We'll proceed with hundreds of millions of dollars, but weare looking for much more than that," McLernon said. "We've got the funds and we've got the appetite for afight." S&P and RBS were not immediately available for comment. In a landmark judgement issued last month, Australia'sFederal court found S&P had deceived 12 local governmentcouncils that bought the CPDOs, saying they should never havebeen given a triple-A rating. The Australian judgement, which awarded A$30 million ($31million) in costs and damages to the councils after the noteslost almost all of their value within six months, has been seenas setting a precedent for future litigation around the world. The Australian case marked the first time a ratings agencyhad faced trial over the complex financial products widely citedas one of the factors that triggered the global financialcrisis. LITIGATION FUNDING SPOTLIGHT The case has also shone the spotlight on the rapid growth oflitigation finance, which in recent years has sparked a numberof start-up investment companies competing to fund large-scalecommercial lawsuits in countries including Australia, Britainand the United States. Litigation funders such as UK-listed Juridica InvestmentsLtd and Burford Capital Ltd provide financingfor lawsuits in exchange for a share of any settlement orjudgment, and have been involved in cases against Chevron Corp and Apple Inc among others. If the litigantloses, it does not have to repay the financial investor. Sydney-based IMF, which made A$8 million from the AustralianFederal court case against ABN and S&P, has been credited forpioneering the industry in Australia, where a favourableregulatory environment and a number of high-claim class actionshave proved highly profitable in recent years. IMF made a record net profit of A$43 million from A$71million of revenue for the 2011-12 financial year, up 88 percenton the previous year, on the back of a successful class actionagainst shopping mall owner Centro Properties. As an alternative asset class not correlated to markettrends or other financial investments like commodities or bonds,litigation financing has been seen as an attractive option forportfolio diversification. "The current environment is very favourable for litigationfunding, which is set to benefit both specifically from anincrease in litigation in the aftermath of the global financialcrisis and more generally from the growth that is likely tofollow as an immature industry continues to expand," AnthonySwan, a portfolio manager at Acorn Capital, IMF's largestshareholder, told Reuters. IMF opened Bentham Capital in New York last year, looking totap into the U.S. market where the growth of litigation fundersin recent years has alarmed business lobby groups, who havecriticised the industry as coercive and disruptive to businessesand called on lawmakers to regulate the industry more tightly. Bentham Capital had made two funding investments, one lessthan targeted in its first year of operation. "We've found a lot of pitfalls in the American litigationsystem that we weren't aware of until we educated ourselves sothe first year has been pretty careful, but it's going ingeneral terms in accordance with our expectation," McLernon toldReuters. "The one thing we do believe is that litigation fundingcompanies need to have an international operation. Nationaloperations will find it difficult to get enough cases in to fundunless they take more and more risks."